November 8, 2012 / 7:56 AM / in 5 years

UPDATE 3-Trading rebound buoys SocGen as Greek exit hits profit

* Q3 net profit slumps 86 pct, hit by one-off losses

* CEO Oudea warns economy to remain sluggish in 2013

* Investment bank cutback plan completed

* Talks ongoing over Egypt unit-CEO

* Shares up 0.4 pct

By Lionel Laurent and Matthias Blamont

PARIS, Nov 8 (Reuters) - Societe Generale reported a rebound in trading revenue and said a reshaping of its investment bank was complete, helping investors see past a plunge in quarterly profit due to the cost of shedding unwanted assets.

France’s No. 2 listed bank, like many European rivals, has been slashing costs and selling businesses to meet tougher regulations designed to avoid a repeat of the 2008 financial crisis. The task has been complicated by slowing economic growth as governments drive through austerity measures to cut deficits.

Helped by a central bank-fuelled recovery in financial markets, SocGen on Thursday posted a threefold jump in quarterly fixed-income revenues and said it had completed its drive to slim down its investment bank and strengthen its balance sheet.

While this was not enough to offset losses booked on the sale of Greek unit Geniki and fund-management unit TCW - which took net income down by 86 percent - SocGen shares climbed as investors praised the bank’s efforts to overcome a tougher economy and regulations.

“The plan to cut the balance sheet is complete ... The bank is forging a path towards confidence,” said Francois Chaulet, a fund manager at Montsegur Finance in Paris, who owns shares of SocGen. “Confidence in the group’s future is not yet completely priced in by the market.”

SocGen shares rose over 2 percent in early trade, and at 1010 GMT were 0.4 percent higher in a steady European market . The stock has surged about 40 percent year-to-date but is still trading at only half its tangible asset value, due in part to investor perception the bank is less financially robust than larger and better-capitalised rival BNP Paribas.


Despite a strong quarterly showing, the outlook for 2013 is still murky, SocGen Chief Executive Frederic Oudea warned.

“Economic growth should remain sluggish overall (in 2013), with a key uncertainty in the U.S. - the fiscal cliff - in the beginning of the year,” Oudea said in an interview with Reuters Insider television, referring to the threat of expiring tax cuts and government expenditure in the United States.

“In the euro zone, we can’t expect miracles.”

Lenders across the globe, from Morgan Stanley in the United States to Commerzbank in Germany, are gearing up for deeper cuts to staff and costs to better withstand the uncertainty ahead.

Although SocGen stuck to its end-2013 target of reaching a Basel III core capital ratio of 9 to 9.5 percent, some analysts warned this was still dependent on the economic outlook and the bank’s ability to sell assets at the right price.

“There are still concerns, in our view, about (SocGen‘s) capital adequacy and deterioration of cost of risk (loan-loss provisions) in corporate exposures,” Espirito Santo analyst Andrew Lim said.

SocGen’s Oudea said talks to sell Egyptian unit NSGB to Qatar National Bank were continuing.

He also said SocGen had yet to receive any charge or allegation in the Libor rate-fixing scandal that has dogged the industry and said there was nothing new to say about the bank’s internal inquiry into the matter.


Quarterly net profit dropped to 85 million euros ($108 million) from 622 million a year earlier. The mean forecast in a Reuters poll of seven analysts was 139.1 million euros.

Revenue fell 17 percent to 5.4 billion euros, compared with a mean forecast of 5.5 billion in the poll.

Bond trading and other debt products bolstered the investment bank, outpacing revenue growth of 38 percent at BNP and 67 percent at Deutsche Bank, with equities also growing.

SocGen also made progress in its long-running battle to deplete its stock of toxic debt securities left over from the 2008 crisis, selling 5 billion euros’ worth between July and October.

Reacting to UBS’ shock decision to cut 10,000 jobs and retreat from fixed income, Oudea said SocGen was “absolutely” committed to all of its investment-bank businesses.

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